Somewhere right around 1980, things really changed, and debt began climbing far faster than GDP. And that, right there, is the long and the short of why any attempt to continue the behavior that got us to this point is certain to fail.

It is simply not possible to grow your debts faster than your income forever. However, that’s been the practice since 1980, and current politicians and Federal Reserve officials developed their opinions about “how the world works” during the 33-year period between 1980 and 2013.

Put bluntly, they want to get us back on that same track, and as soon as possible. The reason? Because every major power center, be that in D.C. or on Wall Street, tuned their thinking, systems, and sense of entitlement, during that period. And, frankly, a huge number of financial firms and political careers will melt away if and when that credit expansion finally stops. And stop it will; that’s just a mathematical certainty.

Total Credit Market Debt (TCMD) is a measure of all the various forms of debt in the U.S. That includes corporate, state, federal, and household borrowing. So student loans are in there, as are auto loans, mortgages, and municipal and federal debt. It’s pretty much everything debt-related. What it does not include, though, are any unfunded obligations, entitlements, or other types of liabilities. So the Social Security shortfalls are not in there, nor are the underfunded pensions at the state or corporate levels. TCMD is just debt, plain and simple.

As you can see in this next chart, since 1970, TCMD has been growing almost exponentially.

That tiny little wiggle happened in 2008-2009, and it apparently nearly brought down the entire global financial system. That little deviation was practically too much all on its own for the markets to handle.

Now debts are climbing again at a quite nice pace. That’s mainly due to the Fed monetizing U.S. federal debt just to keep things patched together. As an aside, based on this chart, we’d expect the Fed to not end their QE efforts until and unless households and corporations once more engage in robust borrowing. The system apparently needs borrowing to keep growing exponentially, or it risks collapse.

One could ask why credit can’t just keep growing. But there are many reasons to believe that the future will not resemble the past. Let’s start in 1980, when credit growth really took off. This period also happens to be the happy time that the Fed is trying (desperately) to recreate. Between 1980 and 2013, total credit grew by an astonishing 8 percent per year, compounded. I say “astonishing” because anything growing by 8 percent per year will fully double every 9 years. So let’s run the math experiment and ask what will happen if the Fed is successful and total credit grows for the next 30 years at exactly the same rate it did over the prior 30. That’s all. This is nothing fancy, and it is simply the same rate of growth that everybody got accustomed to while they were figuring out “how the world works.”

What happens to the current $57 trillion in TCMD as it advances by 8 percent per year for 30 years? It mushrooms into a silly number: $573 trillion. That is, an 8 percent growth paradigm gives us a 10-fold increase in total credit in just 30 years:

For perspective, the GDP of the entire globe was just $85 trillion in 2012. Even if we advance global GDP by some hefty number, like 4 percent per year for the next 30 years, under an 8 percent growth regime, U.S. credit would be twice as large as global GDP in 2043.

If that comparison didn’t do it for you, then just ask yourself: Why, exactly, would U.S. corporations, households, and government borrow more than $500 trillion over the next 30 years?

The total mortgage market is currently $10 trillion, so might the plan include developing an additional 50 more U.S. residential real estate markets?

So perhaps the situation moderates a bit, and instead of growing at 8 percent, credit market debt grows at just half that rate. So what happens if credit just grows by 4 percent per year? That gets us to $185 trillion, or another $128 trillion higher than today — a more than 3x increase. Again: for what will we borrow (only) $128 trillion for, over the next 30 years?

When I run these numbers, I am entirely confident that the rate of growth in debt between 1980 and 2013 will not be recreated between 2013 and 2043. But, I’ve been assuming that dollars remain valuable. If dollars were to lose 90 percent or more of their value (say, perhaps due to our central bank creating too many of them), then it’s entirely possible to achieve any sorts of fantastical numbers one wishes to see.

For the Fed to achieve anything even close to the historical rate of credit growth, the dollar will have to lose a lot of value. This may in fact be the Fed’s grand plan, and it’s entirely about keeping the financial system primed with sufficient new credit to prevent it from imploding.

This is all going to end up badly. The writing on the wall is being written in thick, black, magic marker. Unlike times before past crisises were economic information was available to the privledged few, it is now available to almost everyone today. Some call the warnings "Doom Porn", but the stats are just so blaringly obvious, you have to be a blooming idiot not to recognize we are heading for eventual disaster.

No one knows how much time is left before control is lost and the Great Reset commences, so take every advantage of each passing day. Prepare and stack your phyzz...especially at the currently surpressed prices. If by some miracle all this currency printing somehow saves the economies of the world and nothing bad happens, at the very least, you are still going to be the owner of hard assets...and you will still sleep well.

This has nothing to do with $ value. We don't have a strong dollar right now, and nothing is growing. This has to do with the destruction of our manufacturing base and offshoring of all our skilled labor to peon 3rd world countries. China is allowing the yuan to strengthen because they see the writing on the wall. The yuan is at 6 year highs against the dollar. China is turning to an internal consumption based model.(want a stronger yuan for imports, to keep inflation down) Who ever wrote this article is a retard!

Whatever! You're like a 3 year old... Who cares! It was poorly written.

Are denying that all our good jobs haven't been farmed overseas? Are you saying that more printing will solve anything? The Fed. isn't going to be the direct cause of any market meltdown. No amount of printing is going to compensate for decades of dismantling manufacturing and job offshoring through horrible fiscal policy.

Offshoring production = fewer American products being chased by increasing numbers of USD = USD plummetting.

For the last 20 years, USD has been the same as Renminbi.movements in one means the equivalent movement in the other. That is starting to change. The Chinese are jettisoning the dollar peg the way a mult stage rocket might jettison the heavy lifting first stage.

First of all the yuan "midrate" is set by the PBoC everyday, and has nothing to do with demand yet! (yuan isn't floated freely)

China will eventually float the Yuan, and it will rise some against the usd. The PBoC has no other choice as inflation in China is out of control.

The plumeting dollar has to do with the Fed. injecting $85 billion of them into the system every month, not your fewer products more cash chasing meme. The US trade balance has been coming in since January of 2013.

ummmm....you might want to check the ledger vis a vis your years. our debt to GDP ratio during world war II was GINORMOUS. there was inflation...but it was managed through price controls and wage constraints. believe me...you'll never see production on that scale ever again...all done via "fiat currency" i might add. ZERO gold standard...with almost ZERO price appreciation in gold. Obviously that isn't possible now...but you still could get a gold standard. that's an asset inflation that you see not a goods inflation. cash deals for real estate are at an all time high...which means the amount of savings in the banks is going through the roof. now we have bitcoin? really? there's no inflation here. this is DEFLATIONARY. i don't think the Fed could inflate even if it wanted to now. And is has said it wanted to btw.

Guillotine maintenance tip#4: Blade guide-channels should be inspected monthly for potential obstructions. Insects, especially hornets, like to make home in the blade guide-channels. This can cause uneven or slow blade fall that can prevent a rapid decapitation.

To most of us here, this article is not "News"*. But it may be a good reminder to some, or a North Star to those poor souls who get confused or distracted too easily. Or to those gullible ppl who are prone to the Fed's head-fakes, that they will ease off on their FRN/Dollar debt-creation (aka 'Tapering').

This system -- their system of massive wealth transfer from the many to the few -- is inherently designed so that it MUST grow or will die (implode). Like any and all Ponzi schemes.

I'm about as likely to fall for the Fed's head fakes as I am for OJ Simpson's. "A critter does what as a critter is." is an apt motto in regards to the ethics and tactics of the Fed.

* Ever since I watched and bought Chris's "Crash Course" DVDs last year, I've been a huge fan of his and his website. He's not so much a "prophet of doom", as he is a "prophet of the unsustainable". As such, he is a voice of Reason, in a sea of quasi-religious Doomdayers (for whom The End is Here happens every year, like the Black Friday specials).

For 'normal' people (within +/- 2 sigma of Normal), Doomsday-fatigue gets VERY tiring after a while. But preparing for greater self-reliance and overall resiliency makes absolute sense to those of us who are not fanatics, zealots or cultist nutjobs. I suspect that most people will eventually drop the Purveyors of "Addictive and chronic Anger and Fear", and opt for Purveyors of "Happy, Resilient Living". Having had my fill of the former, I now resume my course for the latter: "Steady as she goes, helmsman. Steady as she goes."

"For the Fed to achieve anything even close to the historical rate of credit growth, the dollar will have to lose a lot of value. This may in fact be the Fed’s grand plan, and it’s entirely about keeping the financial system primed with sufficient new credit to prevent it from imploding."

The dollar may need to lose a lot of its value, but so does every other currency, in a race to the bottom. Mathematically that is impossible, as the value of one goes up when another's goes down. That equal and opposite reaction thing. As the U.S. drives down the dollar, others will flood their currency to drive their currency down and the dollar up.

Total Credit Market Debt (TCMD) is a measure of all the various forms of debt in the U.S. That includes corporate, state, federal, and household borrowing. So student loans are in there, as are auto loans, mortgages, and municipal and federal debt. It’s pretty much everything debt-related. What it does not include, though, are any unfunded obligations, entitlements, or other types of liabilities.

"All" debt is "a promise to complete a trade". Such promises are what create our Medium of Exchange (MOE). What we've been seeing here is a sort of Monopoly game, where a small number of players are able to reach into the "bank" any time they want, while the rest of us must "deliver" on our trading promises. The result is a steady increase in inflation. It is this inflation that is funding the defaulted "government trading promises".

In the late 70's interest collections were very high and that recovered much of the MOE left in the marketplace through defaults.

The government parasite is now on the brink of killing its host ... which of course will kill the government.

But government is nothing but a collection of international bankers running a farming operation. They do this by manipulating interest rates. Hold them low (planting), let them slowly rise (growing), spike them and withdraw credit causing defaults (harvest), repeat.

We are actually in their planting season as evidenced by low interest rates (available only to the government planters).

This time I think the government farmers have overharvested, and then overfertilized and killed their seeds. There will be no future harvest.

Folks, our complete recovery with a rise in middleclass living standards is dependent on whether we voters can get money out of our political campaign finance system. With special interest money out of the picture, decisions at the top will reflect the real needs of ordinary citizens.

Prosperity and a return of jobs and industries is merely awaiting a return of the Trade Tariff policies that carried our country for >200 years.

fed wants to drive dollar down for zh this is breaking news well morons it's not news the question is can they do it for what its worth i don't think so my advice while they try buy equities not gold once ms piggy fails like i think she will you want dollars not gold get my point or is it too complicated

"the dollar will have to lose a lot of value. This may in fact be the Fed’s grand plan,"

It's already doing it. When people wake up they''ll say WTF happened.

Zimbabwe economics, the Wiemar Republic, pick your names. The Fed calls it monetizing, buying US debt at trillions/year. Different name and different time. The Federal Reserve is just trying to keep the sheep calm while their destroying the dollar.